Downtown landowners may be asked to pay for new garages

As Palo Alto marches toward a 2014 vote to raise funds for infrastructure repairs, officials are backing away from the kind of all-or-nothing bond that voters passed in 2008 to pay for library renovations. Instead officials are pursuing a series of more-modest proposals with more wiggle room and a greater chance of winning support.

Chief among the options are an increase in hotel taxes and a creation of Mello-Roos districts in downtown and around California Avenue. Both options received on Tuesday the tentative blessing of the City Council's Infrastructure Committee, which is tasked with making a recommendation to the full council about a 2014 ballot measure.

Though the committee did not vote on an actual recommendation, members made clear during the discussion that they now favor a series of different tax increases, each targeting a particular taxpayer segment and a particular infrastructure need. This would be radically different from November 2008, when more than two-thirds of the city's voters approved a $76 million bond to renovate two libraries and to construct the new Mitchell Park Library and Community Center.

Unlike with the library bond, the council's current effort centers on a wide range of infrastructure items that were identified as in need of repair or replacement by a specially appointed citizens' Infrastructure Blue Ribbon Commission. These include a new police headquarters, replacement of two obsolete fire stations, various biking improvements, new parking facilities and a host of "catch up" repairs relating to city streets, sidewalks and parks.

Councilman Larry Klein, who chairs the committee, said Tuesday he expects to send to the full council three different funding alternatives, all of which could be discussed separately and would target different items. One proposal would create Mello-Roos districts, which would effectively require certain portions of the city to pay a tax that would be used to fund facilities in their area. In this case, the boundaries would encompass the business districts in downtown and around California Avenue, with the proceeds going to pay for garages in the two areas.

According to a report from the city's Administrative Services Department, Mello-Roos districts are typically used to build schools, streets and other types of infrastructure. Recently, San Francisco used them to fund street improvements and underground infrastructure near Rincon Point and to pay for garages and various waterfront improvements at the Port of San Francisco.

Mayor Greg Scharff was among those who favored setting up such districts downtown, arguing that it would force the businesses who contributed to downtown's notorious parking shortage to help solve the problem. He requested that staff come back with more information about Mello-Roos districts and a plan for creating them via the 2014 ballot.

In the coming weeks, staff will analyze options for district boundaries and consider possible methodologies for the new tax, which could be based on types of land use or on square footage. Staff will also consider the potential interplay between the new districts and downtown's existing parking-assessment district, which paid for existing garages.

"Traditionally, we've had the people that create the impacts pay for it," Scharff said.

Vice Mayor Nancy Shepherd agreed, though her enthusiasm was more measured. She recommended more analysis and outreach to those property owners who would be affected by the creation of a new district.

"I think we need to have enough information to see if it's a go," Shepherd said. "We need to make sure the public knows that we're taking this into consideration so that we can start hearing from the people who might be impacted."

Formation of the new districts would still require approval of two-thirds of the voters, a threshold that officials feel can be more easily reached with this proposal than with an earlier plan to float a bond that would pay for a new police building. Though that bond idea remains in the air, council members agreed that they cannot seriously weigh it until they get more information about the one major wild card in the infrastructure debate -- a development proposed by Jay Paul Company.

The proposal, which is currently winding its way through the city's environmental-review process, would include the police building as a "public benefit" in exchange for the city's permission to construct two buildings with 311,000 square feet of commercial space at 395 Page Mill Road. The council is scheduled to get its first look later this month at a preliminary traffic analysis for the Jay Paul project, a report that could shed some light on whether the development is feasible.

If the city determines that the impact of Jay Paul's development would be negligible, approval would effectively resolve the police-building dilemma. Otherwise, the council may look to hotels for help.

On Tuesday, committee members reiterated their support for raising the city's hotel tax, also known as a "transient occupancy tax," to pay for infrastructure needs. Unlike a bond, this tax increase would require the support of only 50 percent of the voters, plus one. By staff's estimate, raising the hotel tax from 12 percent to 14 percent would bring in an additional $4.6 million annually, which includes $2.8 million from hotels that are now under construction. Raising it to 15 percent would yield $5.7 million in additional revenues.

Councilman Marc Berman, who had sat on the citizens' infrastructure commission before joining the council, argued the new hotel taxes could help the city fund the police building. The latest city estimate pegs the price of a new police building, including land costs, at $57 million.

Most notably, Berman said, the tax increase, which would require support from only a simple majority of the voters, would be easier to pass than a general-obligation bond, which would require two-thirds majority. A recent survey by the city indicated that support for the police building would fall just shy of this threshold.

"It seems it would make more sense to tie that resource to the least popular infrastructure item, which of the big items is the public-safety building," Berman said, referring to hotel taxes.

Currently, Palo Alto is in the middle of the regional pack when it comes to its hotel-tax rate. Menlo Park, Redwood City and East Palo Alto have a 12 percent rate, while Oakland and San Francisco have a rate of 14 percent. San Jose and Mountain View each have a 10 percent rate, while Anaheim is at the upper end of the scale with 15 percent.

Staff estimates that each $1 million in new hotel taxes can generate $14 million in project funds through the issuance of bonds known as certificates of participation. Thus, a 2 percent increase in hotel taxes coupled with revenues from new hotels could net $64.4 million in infrastructure funds while a 3 percent increase would bring in $79.8 million.

Klein said he would like staff to give some thought as to what the tax increase would look like and argued that a 3 percent hike would be "one percent too far."

"I don't want to see us a state leader or tied for state lead for this," Klein said.

Posted by Marrol
a resident of Embarcadero Oaks/Leland
on Sep 3, 2013 at 10:13 pm

Our city leaders and elected officials have yet to establish sound financial priorities. Their planning has been weak, and they have catered to special interests and fluff projects far too long. The infrastructure needs that we face should have already been funded through the existing budget. It becomes tiresome and insulting to have our city leaders fail to plan, spend frivolously, and then return to the tax payers crying poor. As voters we have to send a clear message that enough is enough.

Posted by common sense
a resident of Midtown
on Sep 4, 2013 at 6:16 am

City Council - City Staff does not share your view that "Traditionally, we've had the people that create the impacts pay for it".

For example, when people ask why residents should pay for a residential parking permit program, when it's the employees of the business causing the problem (and it's the city granting zoning variances for under parking & variances for high density), Transportation Director Jamie Rodriguez will say the city will not pay for a residential parking permit program.

Posted by Rational
a resident of Downtown North
on Sep 4, 2013 at 6:44 am

Mello-Roos? Really? As if property ownership costs in Palo Alto are not high enough?

For the cost of living, I would have expected the petty crime is lower. I also totally agree that residential parking permit program costs should be borne by the businesses and restaurants and not residents!

The article also speaks generally of "improvements" but does not list what exactly the improvements are which any of these funding mechanisms will pay for.

Like Marrol, I will also try to search for a comprehensive strategic plan for the city's infrastructure and financial priorities as I have not seen one.

Posted by wmartin46
a resident of Fairmeadow
on Sep 4, 2013 at 8:10 amwmartin46 is a registered user.

Mello-Roos is a way to borrow money without having to put the matter to the voters. It is clearly an attempt to walk away from "democracy", and to spend without any real checks and balances to even pretend to "live within our means".

Frank Benest floated this idea when he was City Manager. It didn't get a lot of traction then. It should be treated with the same coolness now that it received then.

> Staff will also consider the potential interplay between
> the new districts and downtown's existing parking-assessment
> district, which paid for existing garages.

Since Staff seems to be admitting that the current parking assessment districts are paying for the garages--why do we need a Mello-Roos District?

The reason, of course, is that Mello-Roos Districts allow for spending on all sorts of things, most of which have nothing to do with parking:

A Mello-Roos District is an area where a special property tax on real estate, in addition to the normal property tax, is imposed on those real property owners within a Community Facilities District. These districts seek public financing through the sale of bonds for the purpose of financing public improvements and services.[3] These services may include streets, water, sewage and drainage, electricity, infrastructure, schools, parks and police protection to newly developing areas. The tax paid is used to make the payments of principal and interest on the bonds.
---

Posted by resident
a resident of Another Palo Alto neighborhood
on Sep 4, 2013 at 8:47 am

The City Council is years too late in addressing the traffic/parking
problems it created through its giveaways to developers. It never dealt with the policy issues which caused the problems, or the effects which are going to get much worse just from what is already in the pipeline. Even if new garages are constructed, imagine the visual impacts of these new structures on our Downtown. At this point it is clear that those developers who benefited need to step-up and finance on their own any new parking structures, to provide the parking which they should have provided in the first place. The strength of the office market has exceeded even optimistic expectations and in consideration of the sq footage bonuses and parking exemptions they received, this is the backdrop for these property owners to step-up. Our City has been changed,and greatly damaged, its unique qualities lost. That's done.Now we need to deal with the mess we are in going forward, including all the players who did this- the Council, the ARB, the staff and the developers of the mega-projects.

Posted by Resident
a resident of Another Palo Alto neighborhood
on Sep 4, 2013 at 8:54 am

Building garages is not going to alleviate any problems anytime soon.

What is needed is something that will make a difference soon.

Putting in pay per hour machines, parking meters and satellite parking in the Baylands with regular shuttles, can all be set up relatively quickly. These things will make a difference and nobody even talks about sensible alternatives to building garages.

Parking is something we have to deal with. The problems exist now. Let's get on with solving the immediate problem first.

Posted by Slow the Growth
a resident of Crescent Park
on Sep 4, 2013 at 10:10 am

What is needed is a comprehensive plan. We need to elect leaders that will put new projects on hiatus until we can absorb the growth from the current set of monster developments. Though it may not be "exciting" we really need to focus on basic infrastructure - roads, sewers, parking and schools. With all the development already underway our traffic is going to become more of a nightmare.

Posted by realist
a resident of Another Palo Alto neighborhood
on Sep 4, 2013 at 10:26 am

@ Resident
Be realistic. Nothing is going to make any difference anytime soon.
All the problems you see now are going to get worse. The Council and staff have ruined this City and are inflicting more damage every day. It's a lethal combination of special interests and incompetence
which have done us in.

Raising occupancy tax from an area high of 12% is short sided and a bad business decision. Palo Alto is not San Francisco, and already has a higher occupancy tax than surrounding communities. Business travel is already expected to decrease to the area due to increased rates which are due to low supply. Rather than increase the occupancy tax, figure out a good way to increase the supply in the market.

It is very telling why city is favoring the hotel tax increase - only 50% vote will increase "TAX ON OTHERS". How many of us are hotel operators? City is confirming their general anti-business attitude.

It really is difficult to believe that the City of Palo Alto will be proposing this sort of solution in the immediate future. Why not simply allow a private sector firm to come in, build, finance, and operate this sort of parking function. They seem to work in other cities, so why not Palo Alto?

Posted by resident
a resident of Another Palo Alto neighborhood
on Sep 4, 2013 at 12:56 pm

What has happened is the Council/staff have put the City at a dead end through "bad government" for years and years while they pursued
their own interests/agendas. There are no ready solutions to our
problems or logical and acceptable revenue sources to deal with
our problems. The Council, ARB, and staff have run us into the ground. The residents have stopped listening.

The next thing that needs immediate action is a Moratorium on all construction of projects that do not have adequate parking or parking alternatives for the tenants - real on-site parking, in-lieu fees for all of the parking needed to meet the 4:1,000 parking ratio, factual and measurable TDM provisions. Allowing another partially parked (or unparked) project is just digging the deficit hole deeper and deeper. Moratorium needs to apply to all unbuilt projects including those that have staff approvals and may have been issued building permits. Real action by the City Council to show the citizen community they mean business is the only way the development community will pay attention and come to the table.

Careful with the mechanism for assessment. As it stands today the employees and tenants, not the developer/property owner,pays for the assessments. Owners just collect their "among the highest in the nation" rents and pass costs for taxes, repairs, insurance etc. onto their tenants and employees under triple net leases.

Posted by Henry
a resident of Downtown North
on Sep 4, 2013 at 4:24 pm

Palo Alto needs a moratorium on new development until The Comprehensive Plan is adopted with caps (maximum limits) for new non-residential (office and commercial) and market rate residential.

That puts a stop to the out of control growth. Do the planning first and then build.

This simple solution is not what this Council will do unless the public gets involved now! Council is poised to entitle more growth than what we have already seen. Market forces (profit) will drive the growth and shift the costs onto the rest of us for inadequate infrastructure, overcrowded schools, parking shortages, air pollution, etc.

We also need to elect council members in 2014 who represent what we want and not be fooled by the sound bites and campaign rhetoric.

Posted by Resident
a resident of Another Palo Alto neighborhood
on Sep 4, 2013 at 6:42 pm

Pat

I usually think you put some thought into your comments and respect them.

When I mentioned satellite parking in the Baylands, I was thinking about where the athletics fields are, or beside the utilities lot. I was not thinking of beside the duckpond, or the interpretive center, or where the windsurfers park.

I agree our parklands and Baylands are precious. I would like to see the Interpretive Centre open and the boardwalk repaired too.

Posted by resident
a resident of Another Palo Alto neighborhood
on Sep 4, 2013 at 6:52 pm

The hole the Council/staff has put us in so deep that the scope of the permanent damage to our community is now only beginning to be fully understood. There are no easy fixes to this mess. Another wave of impacts will hit as new projects in the pipline come in. Where will new garages go, how will they be paid for, what will be the visual impact? Some diversion to bikes does not even offset the net increase from new projects and creates more unsafe conditions on narrow streets. Better use of existing garages could provide some help but hasn't happened yet. The idea of satellite parking lots in the Baylands with shuttles through our still gridlocked neighborhoods is a nightmare image. When you throw out land use planning/zoning, grant special favors to developers, and exercise virtually no design control,and are oblivious to aesthetic values, this is what you end up with.

Posted by Resident
a resident of Another Palo Alto neighborhood
on Sep 4, 2013 at 7:02 pm

The athletics field at the Baylands has a large parking lot which is rarely used during the day. Where utilities trucks are parked overnight leave a lot of parking space during the day. Some type of sharing these spots could be utilized.

Posted by Chris
a resident of Evergreen Park
on Sep 4, 2013 at 7:36 pm

@Pat - if you want to build in the Baylands, you need to go talk to Mayor Greg Scharff. As Mayor he appointed himself as Commissioner to the San Francisco Bay Conservation and Development Commission. Since he is a real estate attorney and developer, he is eminently qualified to help you with the Development part.

Posted by confused resident
a resident of Evergreen Park
on Sep 4, 2013 at 9:03 pm

My condo complex provides 2 underground parking spots for residents, so there's no need for us to compete for parking near Cal Ave. I don't understand why my neighbors and I should subsidize parking garages so for folks who live outside our neighborhood and work/dine on Cal Ave. Shouldn't this instead be the responsibility of Cal Ave businesses?

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